Will Equity Answer Wealth Management’s “Compensation Conundrum?”
October 5, 2020
Barbara Herman Quoted
By Charles Paikert
What keeps owners of wealth management firms up at night? Compensation, recruiting, retention and equity certainly top most lists.
According to Schwab’s 2020 Compensation Report, median compensation costs are 70 percent of revenues for firms with over $100 million in AUM.
There are also plenty of advisors who aren’t interested in equity in an RIA because they want to minimize risk, recognizing there is a downside to ownership as well as an upside, according to Barbara Herman, senior vice president for the executive recruiting firm Diamond Consulting.
Established advisors who have worked for wirehouses and been paid on a grid are especially reluctant to move to an RIA’s salary and bonus structure, Herman said.
What’s more, in many cases equity ownership isn’t enticing enough to get a top breakaway advisor to join an RIA because there are so many turnkey solutions available for firms to set up their own RIAs, Herman pointed out.
“There are so many options now for advisors who don’t want to become an employee,” she said.